Our priorities working with customers are honesty and transparency. That is why we have been sharing detailed market research for the past six years – including thorough analyses of the rental environment.
We believe that better understanding of actual market rents and full disclosure of lease terms will lead to an increase in rates such as we are seeing in the rest of Europe. For this reason, the Prologis Research Department has prepared a Prologis to the Point study which illustrates the reality of the global, European and Polish markets for warehouse space.
The entire industry in Europe is growing: demand is rising, construction costs are rising, the value of land and real estate is rising, and rents are rising. As shown in our latest Rental Index, in 2021 net effective rents (headline rents minus incentives) in Europe increased by 7.2% year-on-year, an all-time record. Poland is the only country where rents decreased by 0.5% in 2021 compared with 2020.
When we analyze real rents (headline rents minus inflation) the difference between Poland and other European countries becomes even clearer. Real rents in Poland are over 30% lower than in 2007 and, with the expected high level of inflation, this difference will widen in the near future. The highest effective rents recorded in Poland’s major markets averaged EUR 32 per square meter – much less than the continental European average of EUR 57 per square meter.
“This is mainly due to a lack of transparency in the structure of rents,” said Pawel Sapek, senior vice-president, Regional Head of Prologis in Central Europe. “Agreements that accompany the main lease are in common use. This means that customers rent a warehouse at a certain rate but also receive financial incentives not included in the main lease agreement.”
Appraisers and investors view these financial incentives as one-offs, which confuses the market. The opaque structure of a lease often comes as a surprise when renewal discussions begin. Any incentives not disclosed in the lease agreement lead to the risk of artificially high headline rents and unrealistic project valuations.
Understanding the true value of Polish distribution real estate and the inevitable real increase in rents is vital for the market’s sound development in future years. The current opacity is also a serious concern for customers and investors who need accurate and reliable information in order to make good business decisions. Partnership and transparency are… Made in Prologis.